AMOTIA WASHINGTON UPDATE - FEBRUARY 2016

Congress Delivers a Long Term Highway Bill to End 2015; As the November 2016 Election Takes the Spotlight, Heavy Lifting on Transportation is Still to Come

Last year began with a fractured Congress operating in a hyper-partisan atmosphere overshadowed by early Presidential politics and personalities. While the politically charged climate remained unchanged throughout the year, Congress managed to defy low expectations at least for one issue - passing a long overdue five-year transportation bill, coming after 36 separate short-term extensions.

The passage of the Fixing America's Surface Transportation Act (FAST Act) represents the first long term transportation bill passed by Congress in more than a decade. The FAST Act is a five-year $305 billion measure which modestly increases funding about eleven percent over current spending levels and ensures the solvency of the Highway Trust Fund, at least for the length of the bill. The FAST Act will initially increase spending on highways by $2.1 billion above current levels and by $6.1 billion by 2020. Spending on transit will increase from $8.6 billion to $10.6 billion in 2020. Congressional negotiators sealed the deal in early December of 2015 after many months of negotiations.

While the FAST Act was rightfully deemed a bipartisan success, the legislation does not address the root cause of what has become a chronic funding shortfall. Lawmakers and transportation advocates have struggled over the last decade to find the revenue necessary to maintain the federal surface transportation program. Without finding a solution, Congress has periodically extended the transportation authorization and shifted money from the general budget fund to the highway fund -- the amount totaling $140 billion since 2008 according to the American Association of State Highway and Transportation Officials (AASHTO).

In the FAST Act, Congress managed to cobble together funding from a variety of sources, actions that some transportation advocates have referred to as budgetary "sleight of hand." Lawmakers utilized tweaks to the U.S. Federal Reserve Bank, the U.S. Strategic Petroleum Reserve and tabbed revenue from various U.S. Customs fees to provide $60 billion in new funding for the transportation bill. The sources utilized to fund the FAST Act underscore the difficulty facing Congress as it fails to agree on a sustainable long term funding mechanism. While sufficient funding for surface transportation programs is now in place for the next five years, beginning in 2021 these programs will face a dramatic fiscal cliff as spending is projected to significantly outpace revenue projections by $20 billion annually.

If Congress fails to act, emergency cash infusions from the general budget fund will need to continue unless lawmakers agree on a long-term funding solution for the Highway Trust Fund. This remains the underlying key to the future growth of the federal surface transportation program.

Historically, highway bills use a formula to allocate the federal money to each state. The funds come from the Highway Trust Fund, which receives revenue from the federal gas tax, currently at 18.4 cents per gallon for gasoline and 24.4 cents per gallon for diesel, along with other user taxes and fees. But factors including the vastly increased fuel efficiency of today’s vehicles have lowered overall gas-tax revenues coming into the Highway Trust Fund, leaving Congress to struggle for an effective solution that is also practical. To be sure, that has not included an increase in the federal gas tax, something that has not occurred since 1993.
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While a host of prominent transportation advocates – including the U.S. Chamber of Commerce and the National Association of Manufacturers – strongly argue that the fuels tax should be raised, others have been pushing for usage-based alternatives such as a vehicle miles tax and greater tolling authority for states.

Some in Congress are advocating for a vehicle miles traveled tax (VMT) as well. To bolster this effort, and to assuage the support of VMT advocates, the FAST Act authorizes $95 million to states to conduct research and study the use of alternatives to the gas tax. While there is significant interest in utilizing the VMT as a replacement or a complement to the current gas tax, the proposal has not been able to gain traction for a number of reasons. A primary concern involves privacy issues as a VMT would require a monitoring system be present on all vehicles to record miles and travel. Second, although some areas of the country have proceeded with testing VMT in small sample sizes, most experts agree that as a practical alternative it will be years before the technology itself is actually ready for “prime time.”

Other policy makers are urging what is known as “Devolution,” a process by which the federal government would be removed from the vast majority of transportation responsibilities outside of safety. Advocates of devolution argue that since highways, roads, and transit are primarily local responsibilities, investment, management decisions, and innovation are best left to individual states, freeing them from the federal government’s control and inability to provide adequate, sustained funding.

As 2020 approaches, Congress will need to decide how it is going to address federal highway and transit funding. Congress will try to find its “Golden Goose” or look to a gas tax increase, VMT, tolling or some combination. Otherwise, Congress will likely return to the general fund for an even greater slice of money that is not user generated. This challenge is not lost on Congress. House Transportation and Infrastructure Chairman, Bill Shuster (R-PA) said about the FAST Act, “It was a hard slog, but we got it done.” He also indicated that it was important to begin discussing a sustainable funding mechanism as soon as possible so there is an agreement before the FAST Act expires. “We really need to think outside the box,” Shuster said. Transportation advocates will agree that the Chairman is correct in terms of the timing of finding a future revenue stream. Until then, 2016 begins with a brand new five-year authorization, but the same fractured Congress and a hyper-partisan atmosphere.

In 2015 Congress finally delivered on a transportation bill and this year will be consumed with the election in November. But after the dust settles and a new President is elected, the next transportation funding challenge will begin to loom and Congress will again have to get back to heavy lifting.